It is fortunate that South Florida was spared the worst of hurricane Irma’s 185 mph winds. It has been referred to here as more of a disruptive than destructive storm. It is perhaps too soon to know if Irma will have any long-term impact on South Florida real estate. Statistical data will take a few months to show whether the storm had a negative impact on potential buyers in any significant way. Will the images of the storm’s destruction broadcast around the world cause buyers to stay away from South Florida? Only time will tell.
However, some experts believe that history has shown people to have short term memories when it comes to hurricanes and the regions transient population means that in 5-10 years, a new generation of residents who have never been through a hurricane will be residing here.
Could Irma actually be an economic stimulus for Florida? William Dudley, the president of the New York Federal Reserve, believes that the long-term effect of such disasters unfortunately is it actually lifts economic activity as you have to rebuild all the things that have been damaged. Hurricanes kill people, destroy homes and businesses but there is an economic bright side. The South Florida real estate market will fend off the temporary disruption and return to normal.
Although Irma’s damage in South Florida resulted in mostly landscaping destruction and debris, with minimal structural damage reported, there could be a short-term slowdown in the real estate market. This is primarily due to the difficulty to get insurance. A loan from a bank will generally require that your property be insured but with FEMA’s designation of South Florida as a disaster area, insurance companies may delay lending or insuring as they measure risk. If your lender won’t close then you usually won’t close the purchase. In some cases, a re-inspection will be needed which will delay the closing. If there is hurricane related damage and the damage is greater than percentage of value, sometimes it gives buyers the ability to walk away. In the short-term, closings may be delayed.
According to the Miami Association of Realtors, they are estimating that closings in September will be down more than 25% in pending closings basically because there was no business conducted for a two-week period. However, now that the storm has passed, people will want to get back to normal as quickly as possible. Some experts believe that an occurrence such as a hurricane will cause potential buyers and sellers to expedite their decision making in what to do. There is also a widely held sentiment that most people buying in South Florida know the risks of potential storms and weigh these risks against the benefits of living here. What will likely come out of this is that buyers will be more interested in buying properties that meet updated building codes, have hurricane impact windows and doors, detailed pre-and post-hurricane guidelines, as well as a communication plan for dealing with hurricanes.
As we look to the future to minimize the damaging results of hurricanes and tropical storms, it is imperative that local governments think about drainage and elevation. They need to think long term and not rely on the Federal government. There are such efforts underway in the form of “MIAMI FOREVER” which would leverage a new property tax on Miami property owners designed to allocate $400M towards infrastructure capital improvements. We all want growth and development but we need to ensure that our infrastructure keeps up with development to minimize the damaging ramifications of hurricanes.
Should you have any questions related to this blog, or have an interest in buying or selling real estate in South Florida and are not currently working with an agent, please don’t hesitate to contact me at (954) 547-9438 or via email at JayKenney@SFPropertyTeam.com